Every firm judges whether it desires you as a customer based on its bespoke wish-list of what is a profitable customer. It's like a beauty parade, so today we'll teach you how to make yourself as attractive as possible. Even if you succeed, tastes vary - no one is fancied by all.
The key is boosting your creditworthiness. When you apply for credit (loans, mortgages, cards, energy on direct debit, monthly car insurance, contract mobiles etc) lenders predict future behaviour based on your past.
If you've had problems, or you've no history to predict from, expect rejections or costlier products. Even a perfect history doesn't ensure acceptance - they also assess if you can afford products. Here's a 16 credit boosting tips crash course.
1. Join the FREE MSE Credit Club to interrogate what lenders really think of you. We launched the revolutionary, totally free MSE Credit Club in September to try to demystify the 'acceptance' process, and uncover the true picture of your financial appeal.
It includes a free Experian Credit Score, but lenders don't stop there and we wanted to mimic what they do more closely, so we don't stop there either. It incorporates the features below, many of them unique...
1. Experian Credit Score - how lenders rate your past credit behaviour.
2. Affordability Score - mimics how lenders check whether you can afford a product or deal.
3. Credit Hit Rate - how likely you are to be accepted when you apply.
4. Credit Card & Loan Eligibility Calcs - your odds of getting top deals.
5. How to improve your credit profile - shows where it's strong & weak.
And we're working on adding a lot more, including your full Experian Credit File, how scores change over time and what mortgage you can afford. If you join now, we'll let you know once these are added.
2. Space out credit applications. Lots of applications, especially in a short time, can harm your creditworthiness, even if you're rejected. So spread out applications and do the most important first.
3. Check credit reports annually and before important applications. The three main credit reference agencies, Experian, Equifax and Callcredit, hold reports that chart key info about your financial past. Errors can kibosh applications, so checking them is crucial - preferably all, but at least the biggies (Experian and Equifax).
You've a legal right to see them for £2 each, but find how to check your credit reports for FREE (soon, Experian will be available free via Credit Club). Check line by line for errors. If you miss a mistake, you may be rejected. If you keep applying after, that can harm too. So act sooner.
4. Beware even minor address errors. Sounds trivial, but isn't. As Martin recalls: "I did a TV money makeover for a woman looking to buy a house who couldn't work out why she'd been rejected for a mortgage. It turned out she had an old, technically active but unused mobile still registered to her old home. That was the final straw killing her application."
5. Holding hands and snogging are fine, but beware joint mortgages, loans & bank accounts. If your credit file is linked to someone else, lenders can see their history when you're assessed, so be careful if they've a bad history.
Linking is nothing to do with marriage, holding hands or sharing a bed, it's about whether you've a joint mortgage, loan, bank account and sometimes utility bill. If wrongly linked, see How to delink your finances.
6. Bizarrely, the best way to (re)build a poor score is to get credit - and get PAID to do it. Credit scoring is about predicting future behaviour based on your past. Those with a poor history do poorly, as do those with little history, as predicting's tough. The catch-22 is as you have a poor history, getting credit is difficult.
Yet there are special credit (re)build cards which are easier to get. So get one, then do £50-£100/mth of normal spending on it (never withdraw cash) & repay IN FULL each month so there's no interest. After 6mths to a year, you'll start to gain a decent history. Just ensure you never miss or are late repaying.
Will you be accepted?
Our Poor Credit Eligibility Calc (Credit Club members can access it by logging in) shows which of these cards (and others) you're most likely to get, and doesn't affect your credit score. Better still, some top cards have rewards.
Aqua Advance (eligibility calc / apply*) gives a £20 Amazon voucher after 2mths, as long as you've used it and paid on time. Aqua Reward (eligibility calc / apply*) gives 0.5% cashback. They're a horrid 34.9% rep APR and 39.9% rep APR respectively if you don't repay in full.
If you need to, there are also two cards that give 0% borrowing for 6mths. Generally if you've credit issues you should avoid that, but you can use them as respite from hefty payday loans / overdraft interest. They're Tesco Foundation (eligibility calc / apply*) & Aqua Purchases (eligibility calc / apply*). After the 0% they're 27.5% & 34.9% rep APR.
If you can't even get these, the last resort is the Credit Improver package, which costs £15 upfront, then from £5/mth.
7. Where do lenders get their info from? It comes from three sources - they plug in all to judge you when you apply:
(i) Your application form tells them crucial 'affordability info' and more.
(ii) Past dealings you've had with them. A lender you've banked with has more info on you - sometimes good, sometimes bad.
(iii) Your credit reference files, which include electoral roll info, products you have, court judgments & more.
8. Ensure you're on the electoral roll. If not, getting credit's tougher, as it can cause ID and tracing issues. If you're worried about junk mail, opt out of the 'open' register. See full electoral roll help.
9. Do they fancy me? The most important way to judge attractiveness is 'Will I be accepted for the product?'. The only way to know is to apply but that marks your credit file. Our eligibility calculators show your odds of getting top cards without harming your creditworthiness.
If you're a Credit Club member you can log in and check there. If not, you can speedily check, without signing up, via the following links...
10. Time it right - when you apply can have a big impact. Applications stay on files for a year - bad stuff (such as defaults & CCJs), six years. So if they lapse soon, wait before applying. Also avoid lots of applications in a short time.
11. Slash debt costs to boost your score - up to 41mths 0%. Lowering interest itself doesn't help (though it boosts your coffers) but as it results in more of your repayments clearing the debt, meaning it drops quicker, that can boost your score. See Best Balance Transfers for how.
12. Never miss or be late on repayments. Use a direct debit to be sure, even if just for the minimum (then you can manually repay more).
13. Be accurate and consistent on application forms. Lenders may verify your income and if it's wrong, you may be auto-declined. Inconsistencies over job title or mobile number can also trigger a fraud fail - another form of rejection. See Fraud scoring.
14. Withdrawing cash on credit cards can harm your score. It's expensive & lenders see it as evidence of poor money management. See Is it different for overseas cards?
15. Get unfair defaults removed. If there's one on your file (eg, you didn't pay a catalogue loan as it failed to deliver the goods), get it removed or it can be a killer. For how, see Remove unfair defaults help, and even if it's fair, see how to mitigate the damage from defaults.
16. What ISN'T on your credit file. Many believe every element of their lives is there, but actually it's mainly just a strict set of financial data. So to bust some myths, you won't find...
Student loans (except pre-1998 starters) | Council tax arrears | Parking or driving fines | Who you're married to | Declined applications | How many times you've checked your file (you see this, lenders don't) | Criminal records | For the full list, see What's on your credit file and What's not on your credit file.
That's just the start. For the full set, see our 37 Credit Boosting Tips guide.
This article first appeared in the MoneySavingExpert.com weekly email on 9 November.